Fine wine is presented as a highly liquid alternative asset offering diversification benefits, potential capital gains tax exemptions, and a hedge against inflation, with its investment value driven by outstanding vintages, critical acclaim, and market dynamics.
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hello my name is Dominic Brennan and I'm
a managing director of Cline wine in
this video I want to look at unraveling
some of the mysteries of Fine Wine
Investments that are most liquid of
alternative assets fine wine like
Rolexes and whiskey and vintage cards
and Fine Art and herma bags and scars
for example um are part of a subsets of
investment types called alternative
assets or passion Investments and I
believe passionately that fine wine
offers investors a brilliant opportunity
in terms of diversifying their
Investments and creating a balanced
Diversified portfolio of investment
Holdings so in this video based on my
fine wi investment guide which you can
access here which in which includes a
lot more information than I can put in
this video and it's completely free um
I'm going to try and unravel some of the
mysteries of investing fine wine and
suggest some of the benefits of it and
and things to look out for for a
balanced portfolio of Fine Wines so
so a good place to start would be to
look at some of the benefits of
investing in fine wine as an asset um
now a lot more of these benefits and
lots more information generally is
available in my fine wi investment guide
um which you can access for free by
clicking on the link below the first
point I think to talk about is capital
gains tax exemptions lots of Brokers
will trumpet that uh fine wine as an
asset is capital gains tax exempt um the
first most important thing to say is
always get um proper tax advice um speak
to your financial advisor about it there
are obviously huge benefits um if fine
wine is exempt from capital gains tax
you're not paying tax on your gains of
your of your investment um the advice
given by hmrc is that are wasting assets
or wasting shutle which fine wine is
like a racehorse for example is um
because of the sort of the things that
can happen to a case you know with corks
with um storage Providence breakage um
is anything which has a predictable life
of up to 50 years now with fine wine
lots of wines will last slightly longer
than that many wines won't last 50 years
so it's a real great area um but I would
say that a lot of wines are potentially
applicable for exemptions from capital
gains tax and that is a good place to
start two um fine wine is a hedge
against inflation it's a physical asset
so unlike investing in stocks and shares
um you you're actually buying a tangible
thing you're buying a case of Shadle of
a case of shatow Margo a case of Krug
champagne and it has a
certain value as a tangible asset it
will always be in demand as Krug lefit
you know so it's not like a piece of
paper that can end up being worth
nothing um and it means in in times of
inflation as we've seen over the last 18
months or two years um it's more likely
to retain the majority of its its value
which fine wine largely has
done the third thing to talk about is
that fine wine out performs the majority
of other alternative asset types so the
graph below shows you the night Frank
wealth reports from 2023 um and it lists
a number of um different um asset types
like jewelry cars and so on um and fine
wine is only bettered over a 10 year
period by whiskey which is much more
volatile um so when it comes to
diversifying your Investments fine wine
has a um a
real wealth of data to demonstrate it
has delivered over decades and decades
and decades whereas some um invest
investable assets come and go like bags
own scarves watches whiskey so on the
fourth thing to say is that one of the
great diversification benefits of Fine
Wine as an asset um that it has a
traditionally low correlation to
equities markets like the S&P 500 for
example um so what that means that it's
largely detached from equities market so
in times of real Financial stress and
turmoil like the 20 financial crash or
um during the early stages of the global
Corona virus pandemic um fine wine sort
of insulates the investor uh against
General market termoil and that's that's
a benefit especially when you're trying
to diversify your investment Holdings C
Portfolio I think one of the key things
to think about when considering
investing in fine wine is looking at how
the global events can affect and shift
the Fine Wine Market um so in my fine
wine investment guides which I'll keep
talking about the link is below um I I
go into I look at about eight or nine
different Global events that have
affected the market um but for this
video I'm looking at four brief ones so
the first is um as you can see on this
graph um the September 2008 when Layman
Brothers far for bankruptcy um following
the nationalization of uh Northern Rock
in the UK um so in the financial crash
you can see straight after that moment
the fine wine 100 which is the key fine
wine index
dropped a big chunk so the next uh
Global event is in July 2012 and that's
when China announced a Crackdown an
anti-corruption Crackdown on gift giving
between its members um so over time F
wine had become one of the key most
favored gifts to give between um party
members in this sort of corrupt practice
and that had driven up Global prices of
Fine Wine quite substantially and you
can see that shortly after um the tap is
turned off in July 2012 the market
slides because you're cutting off a
large chunk of the buying
Market um the third point to look at is
July 2016 which is when the UK voted for
brexit so
after brexit um overnight Sterling
weeken considerably and you can see
demonstrably on the graph how the fine y
100 index the key index for fine wine
sort of accelerated and appreciated
hugely in value and that was stay period
of growth for a good sort of four five
years and that was because there was a
currency benefit so because Sterling was
weak um rest of the world buyers either
in US dollars or in Euros were able to
buy ukeld stock Sterling stock at a
currency Advantage um so it was
discounted stop for them so the market s
piled in so as an example there of how
currency can affect fine wine the final
point is uh in March 201 20 so as Corona
virus started to circulate the globe um
and various Nations went to lockdown um
there were genuine fears obviously
financial markets tumbled there were
fears about people's ability to pay for
things so what happened in the F wine
world was the annual program called on
Premier or futures of selling a bordo
vintage um which happened in sort of May
June July August of 2020 saw a really
good vintage a bord vintage
2019 that was released at substantially
reduced prices because there was real
fear in bordo that people wouldn't buy
the wines because there was no money to
go around in fact because people were
staying at home um sales of Fine Wine
globally went through the roof because
there wasn't much else to do it was
something people got passionate about
exploring in their in their free time
and people had money to buy um a really
attractive highly rated critically
acclaimed vintage at much lower prices
than other vintages before it so you can
see then from March 2020 figure eight on
the graph the fine y Market finey 100
climbs and climbs and climbs for another
years so what are the key fine wine
investment philosophies well I can only
talk about how I operate um so as the
Director of Cline wine I have a certain
investment philosophy other businesses
will have their own and I can come on to
that later but for me there are some of
the key aspects I look at are included
in this video but there are a lot more
in my free F mine investment guide which
you can click on the link below to
access the first thing to look at is
outstanding vintages so
largely um the best vintages in say
Bordeaux champagne Italy burgundy um
will produce the greatest wines they're
the most sought after wines and they
will go up in value as inverse Supply
comes into effect inverse Supply is that
there's only a certain amount of each
wine made each year for each each
producer each vintage and over years
those Bott bottles are drunk they're
lost they're damaged they're smashed
whatever so that that supply of that
wine goes down year by year by year wine
is an asset which obviously gets better
the older it is so you have an asset
where as it diminishes in in in Supply
it becomes more desirable which drives
up demand which drives up price so
buyers tend to look for the best
vintages although there there are
obvious exceptions and caveats to this
which I'll go on to some of my examples
later the second thing I look for is the
highest rated wines that tends to come
hand inand with outstanding vintages so
there is a scoring system uh the 100
point system um which is a bit mad
because you rarely see a wine that's
rated lower than 80 so really it's a 20
point system which some UK uh critics
use nevertheless there is something
about a wine which is 100 points 99 or
100 points perfectional potential
Perfection and these are the Hall of
Fame wines uh that drive the market and
are sought after by buyers and investor
s and collectors CU at the end of the
day you might invest in fire wine for 5
years 10 years 15 years but who will buy
your wine at the end of it well it's
often drinkers hotels bars and often
collectors people want to buy and drink
the wine and enjoy it so the best wines
tend to from the best years tend to go
up in value um and terms of critics a
good example is Robert Parker Jr who
drove the market so for for for decades
as the the head of uh the head writer
for the wine Advocate an independent
wine critical magazine or Journal um he
developed 100 Point scoring system um
and the market was sort of beholden to
him if he if he gave a wine 100 points
then then those wines were the most
sought after wines and their value went
up as as an investable asset um and
that's I suppose in hindsight a little
bit concerning that one man can change
the entire Market um what you actually
found was a lots of producers around the
world started changing their
philosophies and wine makinging to
Create and Craft wines which they
thought Robert Parker would like more
Oak big sort of California style Reds
and Bordeaux thankfully we're now
returning to a more ter driven style in
Bordeaux but that's another story um
after Robert Parker Junior's sort of
retirement we have a sort of a
splintering o of crisal opinion but I
mean there are some key critics that
matter most there's Neil Martin from the
UK who's a much respected critic Jaye
Anson from inside bordo they're the for
me the top two but there are loads of
esteem critics around William Keeley
from the wine
Advocate and their 100 Point scores if
they ever give them which are rare um
you know do still drive the market
demonstrably so um so in the past Neil
Martin's given 100 points to certain
wines and their value overnight has gone
up it's really important that when
you're building a fine wi Investment
Portfolio whether with your broker or
with me um that you strive for um you
know your investment amount allowing of
course a mix of different regions so I
would suggests that having bordeau is
not enough although it should be the
bulk or the Bedrock of a of a good
portfolio um fine champagne vintage
champagne uh the wines of Italy from
Tuscany and Piedmont in the north um the
Rome burgundy and so on that they key
regions um which demand your attention
there are other regions which make
fantastic wine which I personally think
have no real investment value there
there's no data suggest that there's a
there's a a clamor for as stunning as
some of the wines from Green are Greek
wines as an investment asset um just to
use an obvious example um so whilst wine
should be enjoyed for drinking and and
for pleasure if you're treating it as a
colon asset um it's important to look at
the key wine regions of the world where
there is demand the fourth and final
thing I'll be looking at um in this
video Al there are plenty more in my
free F wine investment guide available
in the link below um our sub index
outperformers so in the livex um arena
livex is the London International Vint
exchange it's sort of the trading
platform globally for fine wine and they
have their key index which is the fine
fine wine 100 which we looked at before
with some Global offense and seeing how
that affects the market um but there are
also sub indexes so there's um uh an
index for indices for champagne the
champagne 50 the Italian 50 the ran
index the bordo Legends index and so on
and so forth and it's really important
as with any investment you're looking
for a wine or a number of wines which
outperform their peer group so for
example and I look at this later on um
champagne the champagne 50 has saw saw
sort of an exorable rise over about 15
to 20 years and during that time as it
was consistently growing um year on year
a certain number of wine certain
producers were outperforming it
substantially so Salon Champagne is one
of those one of those examples I'll come
on to that later but it's really key
that you look at um sub index out
performers so just to recap um some some
but not all of my fine wi in investment
philosophies um wines that are from
outstanding vintages that are critically
acclaimed from a range of you know
respected um treasured regions and which
outperform their peer group they're the
things I would start to look for if
wine so I'm now going to look at uh
three examples um of wines which l Lely
fit the criteria I've mentioned already
or some that perhaps Buck the trend uh
and the first I'm looking at is sad
nanal 2004 um Salon is probably the most
sought after champagne in the world it's
made in tiny quantities uh and it's only
made in the very very best years you may
go years and years between declared
vintages of SEL um when it's not made it
goes into another champagne that they
make so Salon is really the Apex of
vintage champagne for that reason uh
we've already mentioned inverse Supply
so the less there is of a of a really
sorta why in this case SEL there's not
much to start off with over time it's
going to go up hugely in value the other
thing you to consider is that vintage
champagne is largely only release about
10 years after its vintage so that's
because um producers tend to want to
keep it um maturing for 8 to 10 or even
12 years before they release it to the
market so Salon 2004 was released in
about 2013
2014 so you're already getting an asset
which is matured it's not perhaps fully
mature but it's mature for 10 years it's
not been released
immediately so you have a scarce um
asset from the start which is already
ready to go so for the for the for
champagne as a as a market is probably
the most Global wine brand you know
champagne is not just drunk you know at
home um it's drunk in bars in
restaurants in nightclubs on Yachts on
cruises on airplanes in airports you
know it's one of the biggest Global
cachets um and so you're looking at an
asset type that's that's been released
in 2004 that's ready to go sorry it's
been released in 2014 that's ready to go
Salon since its release 2004 has gone up
29% that's astonishing and it's worth
pointing out that I am yes I am
cherry-picking some great outstanding
examples there are other V which haven't
done this well and there are lots of
wines which don't do any anywhere
remotely near this sort of level of
appreciation indeed there are some wines
that drop in value um a chunk but for
the purposes of showing criteria Salon
2004 has done extraordinarily well um
and this the champagne 50 Market saw a
bit of a a boom really around 2018 2018
to 2021 really um where lots of Brokers
saw that it was a market on the rise and
so lots of investors par their money
into the top wine so Krug Don pero
Christal Tater comp the champagne and
Salon that equates to 35% of years in
terms of Salon we have um scarcity we
have an index outperformer so it's
outperformed the champagne 50
consistently as you can see on on this
graph so this graph shows you the
champagne 50
index and then this graph shows you
salon and Salon although it's not quite
clear from the graphs has largely
outperformed it substantially so that's
the first example the next example is
chat Le Ros 2014 now shat theat um owned
by domain Baron de rild is one of the
Superstar Harlem Globe trots in of wine
branding around the world they make
astonishing wines is one of the famous
five first growths of Bordeaux if there
were sort of a a football style table
system the five first grows would be the
Champions League so they are shatow Lor
Margo muton rild orrion and lefit um now
lefit is sought after and it can it has
consistently delivered for investors
although the reason you should buy Le is
to drink it and enjoy it it is Art it is
poetry it's one of the most stunning
things you'll ever get to try if you try
it and um I recommend you do because
it's it's astonishing wine but for the
purposes of this video looking at how it
behaved in the market um 2014 was an
interesting bordo vintage it it was good
to very good not a great vintage but
certainly good to very good some of the
wines were were very good to excellent
um and it came on the back of a 2013
vintage that was complete wash out and
bord it was a disaster wines were
largely very very poor critical scores
which I talked about before were very
low so people didn't buy the Vintage
they they voted with their feet and they
refused allocations of wines including
the feet so the following year when we
had quite a good
vintage uh cash levels were low for the
for the chatau um and they decided to to
reduce their prices substantially to try
and drive trade of this new 2014 vintage
on Premier or as a future what that
meant was that shattle defeat Russia
which is a really highly rated very
accomplished wine was released at a
really Keen price and over the next year
or two going into uh 2016 and 2017 the
market started to really realized that
there was a bargain to be had here cuz
it hadn't sold out so I had clients that
took on my advice shle the feat 2014 in
2016 and 2017 and it delivered really
well because its place is is in the you
know the upper levels of of lefit
echelons the sorry lefit vertical if you
will in terms of its critical score but
it price was was near the bottom so
since release it's gone up 9 8% then
that's astonishing for any asset um and
that's 12% a year which which is not to
be sniffed at leit as a as a wine is a
wine which as I say delivers
consistently it has a second wine called
uh carad Dela which has often always sry
has often um performed well because it's
a it's a slightly cheaper more
accessible way of owning the brand way
of owning the brand U and that's also
what I to look out
for my final example is not of a wine
uh from a vintage per se but of a
producer uh and this producer is Chu fak
on the right Bank of Bordeaux in santon
and I've mentioned chatu fiac before um
when I talked about my analysis of the
bordo 2022 on Premier campaign um fiac
make brilliant wine um and as there is a
classification system or a league table
on the Left Bank of Bordeaux I've
covered those five first grows of which
lefit rosard is one of them um Santa
Monon on the right bank has its own lead
table a classification system which
begins largely of satellit Village level
and then you have crew Class A which not
not a properly recognized level it's
more of an ASC level but then we have
gron crew Class A as the first tier then
we have Premier gron crew Class A B and
then Premier guu Class A a chatu fiac um
was upgraded from uh Premier gu crew
Class A B to a um a couple of years ago
um the re-evaluation of the
classification system happens roughly
about every 12 years and what it really
means is that a lots of the shatow put
forward their cases with lots of data
and and uh um bid documents essentially
um to the governing body um to try and
get themselves elevated uper upper level
because it means more exposure more
Prestige and therefore more sales and
more demand globally um what happened at
the time was we had some of the previous
Premier gr Class A wineries um like
shatow Angelus shatow uh chatow CH blonc
as an example um pull themselves out of
the system entirely so he decided to
withdraw from the classification system
because they thought it was too honorous
having to prove every 12 years that they
were worthy of the status they they
probably right rightfully claim um that
meant at the top of the tree there was
only one producer which which remained at
at
which was shatow pavy so for a wine to
be elevated out of its classification
system to the highest tier which
happened to shat fiac is a rare thing a
really really rare thing in the wine
world but it happened and what it meant
was that overnight quite literally
overnight jumped up in value so the
first example here is 2016 and you can
see at the point here um in 2022 of the
classification being announced and the
upgrade the value jumps up the next
example here is
2010 again in 2022 when the um
classification is announced and it's
gone to the highest level value drums up
going back as far as 2005 vintage same
thing happens there's a jump a leap in
the value on the market the one is
traded much more um
highly so hopefully that goes to show
that it's not just um you know critical
score and vintage and outperforming the
sub index that can affect fine wine um
the actual classification rules in
different regions have an impact as well
and they they affect global consumer
prices finally some things to be wary of
if you're thinking about investing in
fine wine now I've worked in the wine
industry for eight years now um dealing
with fine wine Investments um and there
are lots and lots and lots of companies globally
globally
that are essentially dodgy um you only
have to type in Far investment scam to
the internet to see that there are lots
of companies that will take your money
and not deliver you wine or that will
deliver you substandard wine um so it's
really important I think for to consider
a few things firstly when you invest
with a company um they should give you a
detailed explanation of why they're
proposing you invest in certain wines
it's not enough that you just sent a
list of wines and ask for ask to pay an
invoice with me at Cline and wine every
portfolio I put together is done is
completely bespoke um obviously there
are wines I favor but I always go back
and look at the data the prevailing data
the historic data and I'll put together
a you know substantial document which
I'll send out to um interested parties
um proposing wines um I think they
should invest in but also why so I'll
suggest that it's because there's an
upcoming classification change or it's
just been rated to 100 points um
although it's this graph shows it's on
the way up so ask questions ask why um a
broker is suggesting you you invest in a
certain wine I've seen fine wine lists
that are readily available on on places
like Reddit from supposedly the world's
leading fine wine investment Brokers um
which include wines which are s of table
wines you know sort of Premier crew shab
uh and wines from regions which have no
investability at all some companies will
take your money and sell you wines that
are from their stock just to get rid of
them so it's really important that you
interrogate your portfolio manager or
the person that's proposing a portfolio
to you about why those wines are
important second thing fine one is not
an FCA regulated market in the UK um so
it's really important you do your
research um and take advice from your
financial advisor your Tax Advisor as
well um personally I behave as if we are
an FC FCA regulated company that's we we
try and behave as much as we can um so
do your research on companies the people
you meet if you can meet them face to
face or or speak to them on a video Zoom
call then I think that's a really
positive thing um another thing to
consider is that when you have paid for
a portfolio of Fine Wines that you have
ownership of them yourself so it's an
important distinction I've helped um
people in the past who have come to me
uh and either they they've not heard
from a company for for ages or the
companies gone bust and run off with
their money and they have no they have
no Financial recourse because the whole
time the company that sold them the wine
own the wine themselves it's really
important when you invest with a broker
that you it's make clear that you own
your wine so for example if you invest
with Cline wine with me um we store our
wine at live X's
um bonded storage um Warehouse called
vinus National which is the gold
standard of f fine investment storage
it's you know it's temperature and
humidity controlled
obviously but it also is rigorous and
there's checking of cases and Bottles um
for you know quality condition checks
Providence checks um and each case that
comes into Vine gets a specific unique
identific identifi I can't even say it
unique unique identification descriptor
so those uids are unique to that
particular case so you should be sent
those uids for physical wine and you
should be your wine should be held in
your account under a sub account in your
name that means that you can go to a
Bonded Warehouse light Vine and say uh
you know I'm Mr Mr Smith here are here
is my sub account here are my uids
please can I have my wine so if anything
happens to the company you're dealing
with you have control of your assets and
you can sell it with someone else or
have delivery of it and drink it or sell
it it's really important that you again
ask those questions of your Brokers um
I've dealt with people in the past who
have been msold wines they've been sold
wines which would readily fit lots of
the criteria I've talked about in this
video but they've been sold them at you
know perhaps double the price so it's
really important that they all not only
you being sold the right ones but
they're selling you them at a proper
price some Brokers will charge you a um
a brokerage fee to get the wine from the
open market so if a wine costs £5,000
for 12 bottles they'll charge maybe 10%
or 8% on top of that to go and get the
wine for you and then they'll charge you
a management fee as well what that means
is that your your wine has to appreciate
by 18% before it even let you break even
at fine at CL fine wine um we charge a
12 1 half% upfront fee that's basically
2 and a half% every year for 5 years and
it's up front and that's the the only
fee there is so if we go and get a wine
from you from the secondary Market you
pay exactly what we pay for the wine and
that means your wine starts appreciating
value much sooner and you start making
the return all things being the same the
properly so I hope that's been a useful
video for you um as I said there's much
more information included in my 28 page
U find wi investment guide which is
completely free there are no catches um
click on the link below um and you can
access that all you have to do is put
your email address in and your name and
and you can download it from from that
link um and that includes information on
the Fine Wine Market um the benefits of
investing in wine um all of my key
criteria for investing in wine um
taxation issues storage and Providence
questions and it includes a couple of um
case studies of wines themselves and
also I've got um several uh example
portfolios which are really interesting
to look at and see how they've performed
over five and 10 years from my clients
they're quite they're quite impressive
um if you've got any questions at all um
either about fine wine in general or
investing in fine wine or indeed if
you'd like to consider doing so with me
I'd be delighted to hear from you please
do drop me a line all my information is
on on our website and also if you
enjoyed the video perhaps you might like
to subscribe or or click click like on
the video that always helps um get the
word out a bit more um but for now thank
you very much for watching this video
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